Half-year Report

RNS Number : 7188D

JPMorgan Russian Securities PLC

30 June 2021

 

LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN RUSSIAN SECURITIES PLC

UNAUDITED HALF YEAR RESULTS FOR THE SIX MONTHS ENDED
30TH APRIL 2021

Legal Entity Identifier:  549300II3MHI98ZLVH37

Information disclosed in accordance with DTR 4.2.2

CHAIRMAN'S STATEMENT

Performance and Overview

The turmoil in global financial markets caused by the Coronavirus (Covid-19) pandemic has thankfully subsided to a considerable extent and I am pleased to say that the performance of the Company has improved significantly in the reporting period. During the six months ended 30th April 2021 the Company's net asset value on a total return basis increased by 25.0%, however this was 6.5% lower than the Company's benchmark (RTS index in sterling terms), which increased 31.5%. The Company's total return to shareholders was +23.0%, taking into account the stock price movement and dividend paid over the period. The positive returns are very welcome with asset values returning nearer to pre-Covid-19 levels.

The Board are pleased to have recently announced that following a review, the Company's investment management fee arrangements with JPMorgan Funds Limited ('JPMF') will change.  With effect from 1st November 2021, the annual investment management fee will be charged at a rate of 0.9% (previously 1.0%) on the net asset value of the Company's portfolio.

During the period a further lockdown was introduced in the UK and the majority of JPMorgan's staff continued to work from home. The whole team at JPMorgan continued to function effectively through this very difficult period as did the Board who met remotely both formally and informally on a regular basis.

The Russian economy has weathered the storm of the pandemic better than many. A rapid and effective lockdown enabled the country to open up in the Autumn of 2020 and movement and business resumed at near normal levels by year end. Worryingly, cases have been rising recently. Russia was the first country to develop and approve a vaccine, the Sputnik V vaccine, but so far only approximately 10% of the population has been vaccinated due to low take up. It remains to be seen what impact this will have in the event of any further outbreaks of Coronavirus, and the government is considering making vaccination mandatory for certain key workers.

The Russian economy has benefitted from the recovery in the price of oil since the lows experienced in 2020. Government support for both businesses and families, whilst at a much lower level than in Western countries, has also helped. Inflation is now running at about 5% p.a. but the outlook for economic growth is positive at 3.8%p.a. for this year and next. The new US administration strengthened its rhetoric against Russia's involvement in the Crimea and Ukraine and in April 2021 introduced further economic sanctions for a range of alleged malign activities, including cyberattacks and the treatment of Kremlin critic, Alexei Navalny. None of the newly introduced sanctions directly impacted the Company.

The level of growth in the Company's assets, whilst pleasingly substantial, was disappointingly well below the index. This was largely due to the portfolio being invested in quality companies with strong revenue earnings and longer term growth prospects, at a time when the market moved sharply in favour of value stocks that responded rapidly and more directly to the economic upturn. More details are given in the Investment Managers' Report on page 10 of the Company's half year report and financial statements.

Continuation Vote and Tender

If the performance of the Company's NAV falls short of that of the benchmark over the five years to 31st October 2021, then the Company is committed to holding a tender offer in the circumstances as detailed in the Key Features page of the Company's half year report and financial statements. The Company's NAV performance from 1st November 2016, being the commencement date of the tender offer performance period, to 30th April 2021 is 1.4% ahead of the benchmark, as identified in the Financial Highlights on page 3 of the Company's half year report and financial statements. Since the end of this reporting period, the relative performance of the Company's NAV has deteriorated and from 1st November 2016 to 31st May 2021, it was only 0.06% ahead of the Company's benchmark. Please see the Glossary on page 26 of the Company's half year report and financial statements for further details of the Company's benchmark.

Discount Control

The Board continues to use the share repurchase authority to assist in managing any imbalance between supply and demand for the Company's shares, thereby aiming to reduce the volatility of the discount. The share repurchase activity has been of real value to the company over the period and has prevented the discount from going out too far at times of reduced demand for the company's shares. The Company's discount to net asset value has remained reasonably steady over the period avoiding the major movements experienced in the previous reporting period which were largely due to the financial turbulence at the start of the global lock down in spring 2020. The discount ended the period at 12.7%, which was wider than at the end of the Company's last financial year, when it was 11.2%. The average discount over the period was 12.2%. The discount has ranged from 9.4% (on 14th December 2020) to 13.8% (on 5th March 2021). As referred to in previous years statements, the Board has committed to buying back, subject to market conditions, at least 6.0% of its issued share capital per annum. During the course of the six month period 1,105,512 shares were bought back, approximately 2.6% of the Company's issued share capital at 30th April 2021. This added 2.3 pence to the Company's NAV return in the period. The weighted average discount at which these shares were bought back was 12.7% and these buybacks accounted for approximately 12.9% of traded market volume during the reporting period. The current policy was initiated in January 2018.

Revenue, Earnings and Dividend

Revenue for the six month period to 30th April 2021 after taxation was £2,399,000 (30th April 2020: £2,674,000) and the return per share, calculated on the basis of the average number of shares in issue was 5.58 pence (30th April 2020: 5.82 pence) per share. The Company receives most of its dividend income during the summer months and therefore, following the pattern of recent years, the Company's interim dividend is expected to be considered by the Board for declaration in September 2021 and is likely to represent the large majority of the total annual dividend, with a significantly smaller final dividend being recommended for approval by the shareholders at the Annual General Meeting for payment in March 2022. Given the impact of Covid-19 on the wider market, at the time of writing, the forecast for dividend receipts by the Company in the year ending 31st October 2021 is more much more positive than we had expected it to be, possibly 20% to 50% above the low 2020 number which was severely impacted by the effects of the pandemic. This very encouraging outlook is due to the portfolio's general slant towards companies with strong revenue earnings and the continued substantial pay outs from the large energy companies in the portfolio.

Board of Directors

As referred to in my Chairman's Statement for the Company's Annual Report released in January 2021, in accordance with the Board Succession Plan, the Company engaged an independent search consultancy to search for a suitably qualified Non-executive Director to replace Robert Jeens as a Non-executive Director and the Audit Committee Chairman. After a thorough selection process, the Board were very pleased to announce that Eric Sanderson was appointed as a director on 4th January 2021 and this was confirmed by the vote for Eric at the AGM in March 2021. Eric Sanderson is a highly experienced and well regarded Non-executive Director and Chairman with extensive knowledge of investment trusts and is an excellent addition to the Board. Robert Jeens stood down at the AGM and the Board thanks him again for his significant contribution to the Company.

Investment Manager

Oleg Biryulyov and Habib Saikaly continue to be the Company's Investment Managers supported by the growing JPMorgan Asset Management's Emerging Markets and Asia Pacific equities team (EMAP). The lead investment manager, Oleg, has some 20 years' experience of investing in Russia and has managed the Company through a number of severe market events. We are also delighted to have Habib contributing to the management of the portfolio. The Company benefits from having two very experienced managers who can support and challenge each other.

In addition, the Company is supported by other teams at JPMorgan Asset Management In particular the Company's compliance with sanctions, which continue, closely monitored and reported on regularly to the Board by JPMorgan Asset Management's compliance function.

JPMorgan Asset Management continues to focus on environmental, social and governance (ESG) issues in all the companies it invest in. They continue to thoroughly scrutinise all companies for compliance with best practice through their embedded ESG evaluation process.

Despite the constraints that remote working has paced on marketing activities I am also pleased to report that the Board have been encouraged by the shareholder communication activities that have been undertaken by the JPMorgan Asset Management Sales, Marketing and PR teams.

Change of Auditors

Ernst & Young LLP (EY) were required to retire under audit rotation regulations in 2022. Hence, following a beauty parade, BDO were selected as the new auditors. They were formally appointed at the AGM in March 2021, and we thank EY for their work over the years.

Outlook

The familiar themes of oil price levels and political uncertainty again loom large in any prediction of the outlook for the Company, added to which the world faces the challenge of managing the impact of the Covid-19 pandemic. The positive signals are that the on-going bounce in global economic activity will continue into the second half of 2021 and beyond which should support the recovery in the price of oil. However, as in other major economies, the prospect of rising inflation lies ahead and the Russian Central Bank has acted quickly with increases to interest rates and further rises are expected.

Increased political tensions also have the potential to derail the more positive economic outlook. The recent deterioration in US and Russia relations has arisen as the new US President seeks to assert his authority and the Russian government has tested the limits of US commitment to the region. The recent US waiving of sanctions, to assist the completion of the Nord Stream 2 natural gas pipeline from Russia to Germany, and the meeting between Biden and Putin in mid-June 2021 are perhaps positive attempts to de-escalate the current situation.

Overall there is no change to the Investment Managers' approach, which has stood the Company in good stead in the past: to continue to seek out the best run companies with strongly growing revenues which are expected to deliver value over time. By holding a portfolio of fundamentally strong companies the Board is confident that the Company is well placed to benefit from the pick-up in the world economy.

Gill Nott

Chairman   30th June 2021

INVESTMENT MANAGERS' REPORT

Economic and political backdrop

The Russian economy has fared relatively well so far during the Covid-19 pandemic. It adapted rapidly to drastic lockdowns across the region and was relatively quick to re-open - lockdowns and travel restrictions were lifted in autumn 2020. Industrial production began to recover, and by the end of 2020, the economy was operating at almost normal levels - and continues to do so. After peaking in the winter months, Covid-19 cases stabilised at the lower levels seen last summer, but have risen again in recent weeks. Russia was the first country to develop and approve a vaccine, although the take up rate has been low, with around 10% of the population vaccinated so far. However, the government has now made vaccination mandatory for some key workers.

As the world's largest oil and gas exporter, the sharp recovery in oil and gas prices that began in May 2020 has been instrumental to the improvement in the Russian economy. Oil, gas and other commodity prices were given added impetus by the arrival of several more vaccines in November 2020, which boosted expectations of a resurgence in global economic activity and air travel. OPEC+ members began increasing oil production in February 2021 and by the end of the review period, Russian oil production was back at 90% of its pre-pandemic level and is forecast to continue rising.

Government and central bank policy has also been supportive. The government provided subsidised bank loans for businesses and additional financial support for families. Total fiscal measures to counter the impact of the pandemic comprised around 5% of Russian GDP, similar to the level of support deployed in China, but much lower than the stimulus delivered by governments in the US (27% of GDP), the UK (18%) and the European Union (11%). The Bank of Russia reduced rates to a low of 4.25% in July last year.

In all, the Russian economy contracted by 3.1% in 2020, a relatively modest fall compared to an average contraction of 4.7% amongst advanced economies. And the outlook is quite positive - the International Monetary Fund forecasts Russian GDP growth of 3.8% in both 2021 and 2022, almost as vigorous as the projected recovery in advanced economies. Inflationary pressures have begun to emerge and the Bank of Russia began to re-tighten policy in March 2021. The official rate is currently 5%. Higher oil prices and the flow-through effects of last year's sharp rouble devaluation will keep some upward pressure on inflation in the near term, but we do not expect inflation to rise significantly above the central bank's 5% guidance level this year.

On the political front, relations between Russia and the new Biden administration got off to a rocky start, exacerbated by some inflammatory rhetoric from the new US President. Tensions rose further in April due to military build-ups on Russia's border with Ukraine. In response, the US increased sanctions on Russia, and troops were subsequently withdrawn. The US has threatened further sanctions in response to renewed Russian provocation, or if Russian opposition leader Alexei Navalny, who was arrested on his return to Russia in January 2021, dies in custody. However, tensions have since eased and a Biden-Putin summit went ahead on 16th June 2021.

Performance

The Russian equity market rose strongly at the end of 2020 and continued to do well in the early months of 2021. The market was supported during this period by a move out of growth stocks such as technology and healthcare companies, into more cyclical, economically sensitive value stocks, including energy companies and financials. This rotation favoured the RTS index, which is dominated by oil and gas producers and banks. The rise in the popularity of cyclical and value stocks mirrored similar moves in other major equity markets. It was driven in part by mounting investor confidence in the global economic outlook now that vaccines are widely available. In addition, fears of rising inflation led to a jump in bond yields and this had an adverse effect on expensive technology and other growth stocks, as higher interest rates reduce the value of projected earnings, and hence stock prices.

The RTS index rose 31.5% in the six months ended 30th April 2021. This compares with the Company's 25.0% return on net asset value (NAV), representing underperformance of 6.5 percentage points. However, the Company has maintained its record of very solid absolute returns, outperformed its benchmark over five and ten years. The Company has also outpaced most of its peers over three, five and ten years.

Our focus on quality and income generating businesses with long-term growth opportunities, was the reason for the underperformance over the past six months, as these stocks tend to cluster in sectors such as materials, IT, real estate and consumer staples, whose performance lagged the market in recent months. At the beginning of the review period, the portfolio had overweight positions in each of these sectors, while being underweight in sectors such as energy, financials and industrials, that outperformed. In late 2020 and early 2021, we took action to staunch the adverse performance impact of these sectoral allocation decisions by reducing our underweights to energy and financials and trimming our overweight positions in IT, real estate and consumer sectors. These adjustments, combined with the positive influence of our underweights to utilities and communication services, partially offset the underperformance seen in the early part of the review period. Gearing detracted modestly, as the portfolio maintained a small net cash position over the period, while stock selection had a very minor overall adverse impact.

Portfolio positioning and stock performance

As mentioned above, we responded to the sudden improvement in the prospects of cyclical and value stocks in late 2020 by increasing our exposure to quality energy and financial stocks and others set to benefit most from the brighter economic outlook and higher interest rates. We also reduced positions in IT, consumer sectors and communications services, which we expect to underperform in the current market climate.

Within the energy sector, we rebalanced our exposure, almost eliminating our underweight. We significantly increased an existing holding in Rosneft on the view that this company, along with Gazprom, is in the best operational and financial position to benefit from the rise in oil and gas prices and higher demand now that global economic activity and air travel are recovering. We also added marginally to our long-term holding in Novatek. We like this business for its growth prospects and its ability to deliver large and complex projects on time and on budget. Finally, we began to build an exposure to Surgutneftegas. We have expressed some concerns in the past about this company, due to its limited disclosures regarding its ownership structure and strategic plans. However, this stock has underperformed the market and oil price rises so far this year, providing a significant margin of safety, and its dividend yield is attractive, not just within the Russian market, but also by global standards. We are very confident we will be paid the 14.5% dividend yield due in August, which will take the annualised yield to almost 30%. This new position performed very strongly and made the largest stock selection contribution to returns over the period. Conversely, we trimmed Lukoil, which detracted, and Tatneft, on concerns about their ability to increase production. In addition, taxation changes have been detrimental and their dividend payments are below those of their industry peers.

In the financial sector, we continued to suffer from our underweight in TCS Group, the online retail financial services provider, which had the largest adverse impact on returns over the period. However, we have discussed in the past our reasons for disagreeing with the market perception of this company, and our view has not changed. Our position in QIWI, the online payments and credit company detracted. Its share price declined sharply on news of regulatory breaches and associated fines, Sberbank, detracted from relative performance - although the share price rose strongly during the review period, the portfolio was underweight this stock. However, we are very pleased with the performance of our out-of-index stakes in Kazakh financial names Halyk Bank and Kaspi, a banking and fintech company. Both contributed to returns over the review period. We have recently re-established an exposure to Moscow Exchange MICEX, due to its unique position at the forefront of Russia's expanding equity market.

Within the technology sector, we took some profits on a couple of holdings that have performed very strongly. Yandex, Russia's equivalent to Google, Tesla, Paypal and Deliveroo, was one of the key contributors to returns over the past six months. Profit-taking on this stock was a major source of funds in the last 6 months, as we reduced our exposure significantly. Valuations looked extended, earnings are falling, and we are concerned about the company's aggressive growth strategy and massive capital expenditure program. EPAM Systems, a digital platform and software developer, was once again one of the portfolio's best performers and we have started to trim our position, as the stock is looking expensive at current levels.

In the Materials sector, we made significant reductions in our gold producers Polyus, Russia's largest gold miner, and Polymetal, which both detracted from performance. However, we added to our stakes in steel producers Severstal, which was one of the main contributors to returns in the past six months, and Novolipetsk Steel (NLMK). We have been surprised by the rise in iron ore and steel prices, but we expect them to remain strong, at least in the short term, driven by the global economic recovery, restocking and the northern hemisphere's construction season. We also significantly increased our holding of Norilsk Nickel. This company produces the nickel, copper and rare metals now in high demand by producers of electric vehicles and batteries and in our view, it offers great exposure to the current boom in these sectors. News that Norilsk has finalised a legal dispute with the state and paid the fine for last year's oil spill  is also welcome and will allow the company to move forward.

We capitulated on our two long term real estate holdings, LSR Group and Etalon, reducing our exposure to LSR Group and selling Etalon outright. In both cases we underestimated the impact of new regulation on the residential construction sector. Ultimately these businesses became far more capital intensive and earnings became more volatile and unpredictable, reducing their attractiveness.

We maintained our underweight positions in the Utilities and Telecoms, and reduced our overweights to Consumer sectors, with mixed results. Not holding the electricity company Inter RAO UES added to returns, and our stake in Rostelecom has done relatively well, outperforming its rival MTS, which we do not hold. We trimmed our exposures to Sistema, the telecommunications services company and department store operator Destsky Mir, taking some profits on both after their recent strong performance. However, we have maintained exposures to both on the expectation that they will continue to deliver strong earnings growth. Our overweight to grocery retailer X5 versus an underweight to its rival Magnit detracted in net terms over the review period, but the position has begun to perform more recently. We opened a new stake in department store operator, Fix Price Group.

In the small cap universe, we have previously discussed our intention to reduce exposure to these less liquid names, as they tend to underperform in rising markets, and this process continued over the past six months. As opportunities arose, we trimmed our holdings in MDMG, a medical care company, and Global Truck, a transport and logistics company.

Our investment approach

The Company remains the only investment trust providing pure exposure to the ongoing transformation of the Russian economy. We aim to build a balanced portfolio of high-quality stocks from across the Russian market, with a focus on companies that possess the capacity to generate income, compound earnings sustainably and grow over the long term. We target market leaders with scope to expand their businesses nationally or internationally. In our view, this approach offers the best chance of delivering positive absolute and relative returns to shareholders, whatever the prevailing economic, geopolitical and investment challenges.

We actively manage the portfolio, basing our decisions on a proven investment process that analyses the fundamental characteristics of individual stocks. Our investment process has not been hindered by the constraints imposed by the pandemic. We continue to build our internal research capabilities to assist us in our task. Our growing team of analysts has deep expertise in this complex and under-researched market. An active approach is, in our view, the right strategy when investing in Russia, given the market concentration and volatility, corporate governance issues and the opportunities amongst under-researched companies, that can be unearthed by thorough fundamental analysis.

Outlook

The outlook for the Russian economy improved over the six months reporting period, thanks to the stabilisation of Covid-19 cases within the country, the brighter global economic outlook and the associated rise in oil, gas and other commodity prices. Despite ongoing uncertainties, especially related to the recent increase in the rate of Covid-19 infections, global roll-out of vaccination programs and the political climate between Russia and its Western counterparts, we believe the risk/reward balance offered by Russian equities is positively skewed. The market currently offers what we see as an almost perfect combination of very low price/earning multiples and one of the world's highest dividend yields - a drawcard for investors seeking diversified income sources in the current low interest rate environment. In our view, the market remains attractive for those willing to bear the associated risks.

Looking ahead, we expect:

• Oil prices to remain firm over 2021, supported by production cuts and higher demand as global economic activity gradually returns to more normal levels. This will be positive for the earnings of Russian energy companies, as well as for the economy generally.

• The central bank to be proactive in combatting inflation, with rates likely to keep rising by another 50-100 bp over the course of this year. This should be sufficient to keep inflation close to the Russian Bank's 5% guidance level. Beyond this year, the central bank is likely to take its lead from the global interest rate environment, as it targets a 2.5-3% margin above US Fed rates.

• Modest rouble deprecation, thanks to higher interest rates, and a marked improvement in the government's budgetary position, given the recent rise in oil prices.

• EPS for 2021 to be 20-50% higher than the very low base set by 2020 results. We foresee an acceleration of the recovery in profitability that started in Q320, improving Russia's attractiveness relative to other emerging markets. Average annual earnings growth of 10% (in USD terms) seems realistic over the next 5 years.

• The environment around sanctions to remain fluid. Economic links with the European Union will be pivotal to resolving the Russia-Ukraine stalemate. We will continue to monitor the situation closely.

Despite the Company's recent underperformance, we believe our longer-term outperformance against the benchmark and our peers is testament to the merits of our approach. We remain confident that our focus on high quality businesses, with compelling growth prospects, remains the best way to capitalise on the opportunities offered by this market, and to realise our objective to maximise total returns to our shareholders over the long term.

Oleg I. Biryulyov

Habib Saikaly

Investment Managers   30th June 2021

INTERIM MANAGEMENT REPORT

The Company is required to make the following disclosures in its half year report.

Principal Risks and Uncertainties

The principal risks and uncertainties faced by the Company fall into the following broad categories: investing in Russia; share price discount and Net Asset Value per share; investment underperformance and strategy; failure of investment process; loss of investment team and Manager; operational and cyber crime; board relationship and shareholders; political and economic regulatory and legal market and financial. Information on each of these areas is given in the Business Review within the Annual Report and Accounts for the year ended 31st October 2020. The emergence and spread of the Covid-19 virus has raised the emerging risk of global epidemics into a principal risk.

Related Parties Transactions

During the first six months of the current financial year, no transactions with related parties have taken place which have materially affected the financial position or the performance of the Company during the period.

Going Concern

The Directors believe, having considered the Company's investment objectives, risk management policies, capital management policies and procedures, nature of the portfolio and expenditure projections, that the Company has adequate resources, an appropriate financial structure and suitable management arrangements in place to continue in operational existence for the foreseeable future and, more specifically, that there are no material uncertainties pertaining to the Company that would prevent its ability to continue in such operation existence for at least twelve months from the date of the approval of this half yearly financial report. In reaching that view, the Directors have considered the impact of the current Covid-19 pandemic on the Company's financial and operational position. For these reasons, they consider there is reasonable evidence to continue to adopt the going concern basis in preparing the accounts.

Directors' Responsibilities

The Board of Directors confirms that, to the best of its knowledge:

(i)  the condensed set of financial statements contained within the half yearly financial report has been prepared in accordance with FRS 104 'Interim Financial Reporting' and gives a true and fair view of the state of affairs of the Company and of the assets/liabilities, financial position and net return/loss of the Company, as at 30th April 2021 as required by the UK Listing Authority Disclosure and Transparency Rule 4.2.4R; and

(ii)  the interim management report includes a fair review of the information required by 4.2.7R and 4.2.8R of the UK Listing Authority Disclosure and Transparency Rules.

In order to provide these confirmations, and in preparing these financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and accounting estimates that are reasonable and prudent;

• state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business;

and the Directors confirm that they have done so.

For and on behalf of the Board

Gill Nott

Chairman   30th June 2021

STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 30TH APRIL 2021

	(Unaudited)			(Unaudited)			(Audited)
	Six months ended			Six months ended			Year ended
	30th April 2021			30th April 2020			31st October 2020
	Revenue	Capital	Total	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Gains/(losses) on investments
held at fair value through
profit or loss	-	63,689	63,689	-	(70,558)	(70,558)	-	(75,410)	(75,410)
Net foreign currency
(losses)/gains	-	(273)	(273)	-	315	315	-	53	53
Income from investments	3,708	-	3,708	4,939	-	4,939	20,107	-	20,107
Interest receivable and similar
income	4	-	4	33	-	33	100	-	100
Gross return/(loss)	3,712	63,416	67,128	4,972	(70,243)	(65,271)	20,207	(75,357)	(55,150)
Management fee	(599)	(898)	(1,497)	(694)	(1,042)	(1,736)	(1,305)	(1,958)	(3,263)
Other administrative expenses	(365)	-	(365)	(425)	-	(425)	(932)	-	(932)
Net return/(loss) before
finance costs and taxation	2,748	62,518	65,266	3,853	(71,285)	(67,432)	17,970	(77,315)	(59,345)
Finance costs	(2)	-	(2)	(3)	-	(3)	(10)	-	(10)
Net return/(loss) before
taxation	2,746	62,518	65,264	3,850	(71,285)	(67,435)	17,960	(77,315)	(59,355)
Taxation	(347)	-	(347)	(1,176)	748	(428)	(2,585)	117	(2,468)
Net return/(loss) after
taxation	2,399	62,518	64,917	2,674	(70,537)	(67,863)	15,375	(77,198)	(61,823)
Return/(loss) per share
(note 3)	5.58p	145.55p	151.13p	5.82p	(153.48)p	(147.66)p	34.01p	(170.78)p	(136.77)p

STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 30TH APRIL 2021

	Called up	Capital
	share	redemption	Other	Capital	Revenue
	capital	reserve	reserve	Reserves1	Reserve1	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Six months ended 30th April 2021 (Unaudited)
At 31st October 2020	434	167	-	251,927	13,571	266,099
Repurchase and cancellation of the Company's
own shares	(11)	11	-	(7,139)	-	(7,139)
Net return	-	-	-	62,518	2,399	64,917
Dividend paid in the period (note 4)	-	-	-	-	(4,299)	(4,299)
At 30th April 2021	423	178	-	307,306	11,671	319,578
Six months ended 30th April 2019 (Unaudited)
At 31st October 2019	462	139	12,528	333,503	13,708	360,340
Repurchase and cancellation of the Company's
own shares	(6)	6	(3,517)	-	-	(3,517)
Net (loss)/return	-	-	-	(70,537)	2,674	(67,863)
Dividend paid in the period (note 4)	-	-	-	-	(4,601)	(4,601)
At 30th April 2020	456	145	9,011	262,966	11,781	284,359
Year ended 31st October 2020 (Audited)
At 31st October 2019	462	139	12,528	333,503	13,708	360,340
Repurchase and cancellation of the Company's
own shares	(28)	28	(12,528)	(4,378)	-	(16,906)
Net (loss)/return	-	-	-	(77,198)	15,375	(61,823)
Dividends paid in the year (note 4)	-	-	-	-	(15,512)	(15,512)
At 31st October 2020	434	167	-	251,927	13,571	266,099

¹ These reserves form the distributable reserves of the Company and may be used to fund distributions of profits to investors.

STATEMENT OF FINANCIAL POSITION

AT 30TH APRIL 2021

	(Unaudited)	(Unaudited)	(Audited)
	30th April 2021	30th April 2020	31st October 2020
	£'000	£'000	£'000
Fixed assets
Investments held at fair value through profit or loss	311,668	280,690	261,864
Current assets
Debtors	5,734	203	612
Cash and cash equivalents	2,521	3,607	4,129
	8,255	3,810	4,741
Current liabilities
Creditors: amounts falling due within one year	(344)	(141)	(506)
Derivative financial liabilities	(1)	-	-
Net current assets	7,910	3,669	4,235
Total assets less current liabilities	319,578	284,359	266,099
Net assets	319,578	284,359	266,099
Capital and reserves
Called up share capital	423	456	434
Capital redemption reserve	178	145	167
Other reserve	-	9,011	-
Capital reserves	307,306	262,966	251,927
Revenue reserve	11,671	11,781	13,571
Total shareholders' funds	319,578	284,359	266,099
Net asset value per share (note 5)	756.0p	624.2p	613.4p

STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED 30TH APRIL 2021

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	30th April 2021	30th April 2020	31st October 2020
	£'000	£'000	£'000
Net cash outflow from operations before dividends and
interest1	(2,130)	(1,594)	(4,131)
Dividends received	3,142	5,843	18,551
Interest received	6	33	98
Overseas tax recovered/(paid)	16	-	(15)
Interest paid	(2)	(3)	(10)
Net cash inflow from operating activities	1,032	4,279	14,493
Purchases of investments	(86,518)	(52,517)	(124,238)
Sales of investments	95,315	58,741	144,628
Settlement of forward currency contracts	46	(40)	6
Net cash inflow from investing activities	8,843	6,184	20,396
Repurchase and cancellation of the Company's own shares	(7,130)	(4,057)	(17,292)
Dividends paid	(4,299)	(4,601)	(15,512)
Net cash outflow from financing activities	(11,429)	(8,658)	(32,804)
(Decrease)/increase in cash and cash equivalents	(1,554)	1,805	2,085
Cash and cash equivalents at start of period/year	4,129	2,060	2,060
Unrealised loss on foreign currency cash and cash equivalents1	(54)	(258)	(16)
Cash and cash equivalents at end of period/year	2,521	3,607	4,129
(Decrease)/increase in cash and cash equivalents	(1,554)	1,805	2,085
Cash and cash equivalents consist of:
Cash and short term deposits	2,268	381	243
Cash held in JPMorgan US Dollar Liquidity Fund	253	3,226	3,886
Total	2,521	3,607	4,129

¹ The unrealised exchange loss on the JPMorgan US Dollar Liquidity Fund in the comparative column has been moved from the initial 'Net cash outflow from operations' total to be disclosed separately as the 'unrealised loss on foreign currency cash and cash equivalents' .

NOTES TO THE FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30TH APRIL 2021

1.  Financial statements

The information contained within the financial statements in this half year report has not been audited or reviewed by the Company's auditors.

The figures and financial information for the year ended 31st October 2020 are extracted from the latest published financial statements of the Company and do not constitute statutory accounts for that year. Those financial statements have been delivered to the Registrar of Companies and including the report of the auditors which was unqualified and did not contain a statement under either section 498(2) or 498(3) of the Companies Act 2006.

2.  Accounting policies

The financial statements have been prepared in accordance with the Companies Act 2006, FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' of the United Kingdom Generally Accepted Accounting Practice ('UK GAAP') and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' (the 'SORP') issued by the Association of Investment Companies in October 2019.

FRS 104, 'Interim Financial Reporting', issued by the Financial Reporting Council ('FRC') in March 2015 has been applied in preparing this condensed set of financial statements for the six months ended 30th April 2021.

All of the Company's operations are of a continuing nature.

The accounting policies applied to this condensed set of financial statements are consistent with those applied in the financial statements for the year ended 31st October 2020.

3.  Return/(loss) per share

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	30th April 2021	30th April 2020	31st October 2020
	£'000	£'000	£'000
Return/(loss) per share is based on the following:
Revenue return	2,399	2,674	15,375
Capital return/(loss)	62,518	(70,537)	(77,198)
Total return/(loss)	64,917	(67,863)	(61,823)
Weighted average number of shares in issue	42,953,385	45,959,452	45,203,549
Revenue return per share	5.58p	5.82p	34.01p
Capital return/(loss) per share	145.55p	(153.48)p	(170.78)p
Total return/(loss) per share	151.13p	(147.66)p	(136.77)p

4.  Dividends paid

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	30th April 2021	30th April 2020	31st October 2020
	£'000	£'000	£'000
2020 Final dividend paid of 10.0p (2019: 10.0p)	4,299	4,601	4,601
2020 interim dividend of 25.0p (2019 : 25.0p)	-	-	10,911
Total dividends in the period/year	4,299	4,601	15,512

All dividends paid in the period/year have been funded from the revenue reserve.

The 2021 interim dividend is expected to be payable in October 2021.

5.   Net asset value per share

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	30th April 2021	30th April 2020	31st October 2020
Net assets (£'000)	319,578	284,359	266,099
Number of shares in issue	42,273,400	45,557,032	43,378,912
Net asset value per share	756.0p	624.2p	613.4p

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

JPMORGAN FUNDS LIMITED

30^th June 2021

For further information, please contact:

Paul Winship

For and on behalf of

JPMorgan Funds Limited

020 7742 4000

END

A copy of the half year will be submitted to the FCA's National Storage Mechanism and will be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism

The half year will also shortly be available on the Company's website at www.jpmrussian.co.uk where up to date information on the Company, including daily NAV and share prices, factsheets and portfolio information can also be found.

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

 

END

 

 

IR BUGDLLBXDGBG